Every 15 days a company receives P10,000 worth of raw materials from its suppliers. The credit terms for these purchases are 2/15, net 30, and payment is made on the 30th day after each delivery. Thus, the company is considering a 1-year bank loan for P9,800 (98% of the invoice amount). If the effective annual interest rate on this loan is 12%, what will be the net peso savings over the year by borrowing and then taking the discount on the materials? *[ Format: 1, 111.11

Net Savings 102

Step-by-step explanation

Thes best way to solve this kind of problem is to create a table to compare the amounts.

The 2/15 means that if we pay within 15 days we will have a 2% discount. So if we take the loan we will have a discount of 10,000 x 2% = 200. The n/30 meams that the credit is for only 30 days and when you dont pay you are considered past due and this will have effect on wether they will allow you to avail their products on credit.

You are able to generate cash every 30 days that is why you can only pay the supplier every 30th so if you take a only you will be able to generate money to pay the only after 30 days hence the interest will be for 1 month only. You could use 30/360 or 1/12 it will result to same answer.

Interest = 9,800 x 12% x 1/12 = 98